Correlation Between Xtrackers and Legal General

Can any of the company-specific risk be diversified away by investing in both Xtrackers and Legal General at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Xtrackers and Legal General into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Xtrackers II and Legal General UCITS, you can compare the effects of market volatilities on Xtrackers and Legal General and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Xtrackers with a short position of Legal General. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xtrackers and Legal General.

Diversification Opportunities for Xtrackers and Legal General

-0.37

Correlation Coefficient

Xtrackers  Legal General

Very good diversification

The 3 months correlation between Xtrackers and Legal is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers II and Legal General UCITS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Legal General UCITS and Xtrackers is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Xtrackers II are associated (or correlated) with Legal General. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Legal General UCITS has no effect on the direction of Xtrackers i.e., Xtrackers and Legal General go up and down completely randomly.

Pair Corralation between Xtrackers and Legal General

Assuming the 90 days trading horizon Xtrackers II is expected to under-perform the Legal General. But the etf apears to be less risky and, when comparing its historical volatility, Xtrackers II is 1.44 times less risky than Legal General. The etf trades about -0.08 of its potential returns per unit of risk. The Legal General UCITS is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  646.00  in Legal General UCITS on September 16, 2024 and sell it today you would earn a total of  142.00  from holding Legal General UCITS or generate 21.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Xtrackers II   vs.  Legal General UCITS

Xtrackers II

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Xtrackers II has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Xtrackers is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Legal General UCITS

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Legal General UCITS are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, Legal General exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Xtrackers and Legal General

The main advantage of trading using opposite Xtrackers and Legal General positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Xtrackers position performs unexpectedly, Legal General can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Legal General will offset losses from the drop in Legal General's long position.

The idea behind Xtrackers II and Legal General UCITS pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.